Seeds of opportunity in tough soil

While global volatilities make for strong headwinds, there is plenty of space for private investment in the Vietnamese agricultural sector

What were the highlights of Vietnam’s agricultural sector in 2019?

It was a very difficult year with three challenges for the agricultural sector. The trade war between the United States and China has had a heavy impact on trade activities of agricultural products. Second, there was an extreme phenomenon of climate change. Third, in the process of agricultural restructuring, small production still accounted for a major proportion, threatening safety, reducing competitiveness, and causing other difficulties.

In addition, historic heat in the central provinces in June, African swine fever (ASF), and fall armyworm plagued agriculture in 2019.

However, thanks to the efforts of the entire political system, consensus of all economic sectors, including enterprises, co-operatives, and farmers, the agricultural sector gained positive, but incomplete results.

Despite being affected by ASF, the agricultural sector’s GDP growth in 2019 was still above 2 per cent. This is a great effort. Second, the export of agricultural products reached $41.3 billion. This is the highest result ever in a very difficult global picture of agricultural trade. Third, about 4,800 communes, or 54 per cent, fulfilled the 19 criteria for new rural areas. Lastly, the forest coverage was 41.85 per cent. This is a very positive result, achieved in very difficult circumstances. Currently, the highest average rate of forest coverage in Asia is only 29 per cent, while the world rate is 26-28 per cent.

Moreover, we have established the forestry economy with 20 million cubic metres of timber harvested in nearly seven million hectares of planted forests, contributing to a revenue of $11.3 billion, creating 20 million part-time and full-time jobs. The forestry sector has made an outstanding effort, ensuring economic development, environmental protection, and social security.

How has the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) impacted Vietnam’s agriculture, and how will the EU-Vietnam Free Trade Agreement (EVFTA) do the same for the sector?

All the mentioned achievements have laid a foundation for us to be confident before the new-generation free trade agreements, including the CPTPP and EVFTA which can bring great opportunities by boosting exports and enhancing the capacity of Vietnam’s agricultural sector, and create significant challenges for Vietnam’s agriculture.

In particular, with the upcoming EVFTA, Vietnam will cut 24 per cent of the committed agricultural tariff lines to zero in the first year of the deal’s entry into force, and remove 99 per cent after 10 years. Meanwhile, the EU will pare down 74.6 per cent of agricultural tariff lines in the first year, and the rate will be 97.3 per cent in the next 10 years.

For the CPTPP, although it has been in effect for a year now, this is only the first stage, the roadmap for tax reduction has yet to work, so the impacts of this agreement are not clear. However, thanks to this agreement, we witnessed the transformation of agricultural enterprises.

Agricultural products are gradually being produced in accordance with international standards and regulations to take advantage of this agreement. This highlights the adaptability of the Vietnamese economy, particularly the agriculture. The harder the going gets, the more determined we are to resolve and adapt.

2019 marked the strong participation of private businesses in the agricultural sector. How attractive has the Vietnamese agricultural sector been to those?

First, over 30 years of doi moi, we have had over 760,000 businesses, including agricultural businesses, especially large ones with experience in management and finance, and a desire to solve problems in the agricultural sector.

Second, the sector has huge potential and advantages. Although we exported up to $41.3 billion in 2019 to 185 countries and territories around the world, the room for growth is very large because most of our export products are raw, without intensive processing.

Currently, the total global trade in food is more than $2 trillion. If we do good work throughout all stages of processing and chain production, we can create huge added value from it. For example, we exported more than $3.5 billion worth of coffee beans, but the value of processed products accounted for only 11 per cent. The remaining 89 per cent offers great potential for processors. Currently, in pig farming, processing lines and value chain received little attention. The same could be observed in most sectors. Therefore, businesses see huge potential in agriculture.

Third, Vietnam’s current policies are very open which are appealing to businesses. Besides, all 63 cities and provinces have been actively calling for investors. In the past three years, a large part of investment promotion activities targeted the agricultural sector, with many programmes hosted by Ho Chi Minh City. Currently, agriculture accounts for only 0.6 per cent of the city’s GDP, but the city has definite plans to invest in high-tech agriculture. This is particularly appealing for businesses.

In 2020, what will be the central tasks for the agricultural sector?

2020 will be a difficult year. Right from the beginning, we have witnessed the extreme effects of climate change such as droughts in the north and salinity in the Mekong Delta. It is forecast that three large lakes in the north – Son La, Lai Chau, and Hoa Binh – will lack 40 to 55 per cent of the water needed this year. Meanwhile, the whole central region will also suffer from water shortage.

As recently as last September, the Mekong Delta region was forecast to face severe salinity intrusion and droughts due to the shortage of up to 60-65 per cent of the water in the upstream area.

Moreover, although ASF has been subdued, it is still not safe. Armyworms appeared in 14 provinces last year, and are likely to return this year. We expect 2020 to be a difficult year with the effects of extreme weather phenomena.

In addition, the biggest challenge facing Vietnam’s agricultural sector is the market. Although there are new trade agreements, they are still at an early stage, and the positive effects from tax reduction are not yet apparent.

Meanwhile, the global trade war has forced countries to focus on developing agricultural products on their own. This has created pressure for exporting countries, especially major agricultural exporters like Vietnam.

However, right after the government on January 1 issued Resolution No.01/NQ-CP on major tasks and solutions to realise the country’s socio-economic development plan for 2020 and state budget estimates in 2019, which assigns the agricultural sector an export value of about $42 billion, the industry has determined to strive to achieve at least that. This is a difficult target in the global context of fierce competitiveness for markets and agricultural products, but with the utmost determination, the participation of the entire political system, economic sectors, and people, the agricultural sector will strive to achieve the highest results.

One of the highlights in 2019 was the new rural development programme that finished nearly two years earlier than planned, and exceeded its goals by 4 per cent. That is good news. However, in 2020, we continue to identify two large groups. For the communes meeting the 19 criteria for new rural areas, it is necessary to consolidate and improve two key groups of criteria, including promoting agricultural production and rural economy, and focusing on environmental issues like the living, working, and natural environment.

Identifying private businesses as the driving force for the modernisation and application of high technology in agricultural development, the ministry will also pay attention to facilitating and attracting wider private sector participation in the processing of agricultural products for export.